On student loans, Hugo Chavez and Joe Flacco's taxes

Robert L. Ehrlich Jr. reminds readers of a few details they might like to forget

March 31, 2013|Robert L. Ehrlich Jr

Remember when President Barack Obama stuck a federal takeover of the student loan program into the "Affordable Care Act," AKA "Obamacare"?

The dirty deed was accompanied by a promise that federal control would save taxpayer money and cut off all the private sector profiteers anxious to put the screws to student loan applicants.

Now comes the Federal Reserve Bank of New York with a daunting report on the grand experiment: A startling 35 percent of student loan-borrowers under 30 years of age were 90 days or more late in their payments as of December 31, up from 26 percent in 2008 and 21 percent in 2004.

The Fed also reported that those who are delinquent with their student loan payments are more likely to be behind on their car, credit card and mortgage payments.

The bottom line: a rapidly escalating default rate within a rapidly escalating student loan program (up 110 percent last year to $966 billion) means that more taxpayer dollars are now on the hook. Some "tax saver"! Such is a familiar refrain to readers of this column, but somehow lost on all those legislators who continually vote to give the government more power and control over our money.

•Remember when the recently deceased dictator Hugo Chavez promised to improve the lot of Venezuela's poor?

Such was the promise during the Chavez years. But the poor will not miss the anti-Semitic petro-dictator. The champion of Hollywood leftists and anti-American agitators may have peddled a fiery brand of socialism (fueled by surging oil prices), but history and economics usually catch up to undemocratic socialist bullies. Under Chavez, life for Venezuela's poor only got worse. Investment capital has dried up, the country's infrastructure is in disrepair, its previously successful government-owned oil company is a shadow of its former self, the cost of consumer goods is sky high, public health is deplorable, and food and medicine shortages are commonplace.

Chavez's tenure speaks to an inconvenient truth: socialism never delivers on its promises for the poor and downtrodden. It's history's "big lie," told over and over again to the dispossessed. As America closes in on 47 million of its citizens on food stamps and increasing public acceptance of a gigantic (and debt laden) welfare state, perhaps we should pause and take another look at our trend lines.

•Remember when the federal government left its nose out of public K-12 education?

Perhaps listening to the president bemoan the federal budget sequester's impact on public school teachers brought the point home.

Federal dollars with regard to Title I (poor children) and I.D.E.A. (disabled kids) are needed and clearly appropriate, but there's precious little else the feds need to supervise.

Yet the federal Department of Education now employs 4,300 workers. Federal K-12 expenditures will exceed $38.5 billion this fiscal year. And far too many politicians continue to push the limits of federal jurisdiction in order to secure ever more dollars — and ever more federal control over local education.

A few years ago, at a well attended local forum (in which I participated), a long serving federal official from Maryland (name withheld to protect the guilty), aggressively bemoaned the lack of federal dollars available for local school construction — local school construction!

A gentle reminder for those of my readers who might be tempted to agree: reread The Federalist Papers, then attend a local school board meeting. Remember, there are still a few jobs best left to local and state governments.

•Remember when state and local tax rates were not a part of media reporting on NFL contracts?

Those days are past. Rapidly escalating salaries have players, agents and fans looking at state taxation as a factor in the decision of where a player might sign.

Take the Joe Flacco negotiation. Fortunately, the Super Bowl MVP chose to stay with the team that drafted him out of the University of Delaware. The team in turn made him the highest paid player in the National Football League. But various media reports reflect that Joe does not take home the most money in the league. He plays in tax heavy Maryland, where his combined marginal tax rate (federal, state, local and Medicare) is 52 percent, not counting the state taxes he pays for road games played in states with an income tax.

Now Joe is a long way from the poorhouse, but he could have saved a bundle ($1.72 million per year) by playing in Texas (Cowboys), Florida (Buccaneers, Dolphins, Jaguars), or Tennessee (Titans).

Good for Ravens fans that Joe did not seek to maximize his after-tax income. Unfortunately, many Maryland companies (and taxpayers) have not arrived at a similar conclusion. For context, check out all those Ravens flags in Shrewsbury, Pennsylvania!

Robert L. Ehrlich Jr.'s column appears Sundays. The former Maryland governor and Member of Congress is a partner at the law firm King & Spalding, the author of "Turn this Car Around" — a book about national politics. His email is ehrlichcolumn@gmail.com.